TORONTO — Canada's main stock index snapped a five-day winning streak on a broad-based decline including its largest sectors, but still posted its best week in more than a year.
The S&P/TSX composite index closed down 79.93 points to 18,982.92 points, but still ended the week up 3.2 per cent for its strongest performance since February 2021. The Toronto market is up 0.6 per cent in July but down 10.6 per cent so far in 2022.
"It has been a great week and we've seen a nice bounce and I think what was really informing markets this week was the beginning of earnings season," said Lesley Marks, chief investment officer at Mackenzie Investments.
Although earnings have largely come from the U.S., they do have an impact on sentiment toward Canadian stocks by association, she said.
"And I think the reality was that we experienced some earnings data from companies that was not as bad as we expected."
On Friday, Canada's technology sector was dragged lower by weakness south of the border with Snap shares plunging 39 per cent after reporting very disappointing revenues. Shopify ended a good week by losing 7.3 per cent on Friday.
In New York, the Dow Jones industrial average was down 137.61 points at 31,899.29. The S&P 500 index was down 37.32 points at 3,961.63, while the Nasdaq composite was down 225.50 points at 11,834.11.
U.S. markets were up between two and 3.3 per cent for the week despite Friday's losses and 4.3 to 7.3 per cent in July. However, they are down 12.2 to 24.4 per cent in 2022.
The energy sector decreased Friday as crude oil prices dropped to their lowest level in more than three months. Shares of Enerplus Corp. and Vermilion Energy Inc. were down 3.1 and 3.0 per cent, respectively.
The September crude contract was down US$1.65 at US$94.70 per barrel and the September natural gas contract was up 38 cents at US$8.20 per mmBTU.
"The energy sector, like most of the commodity complex, is grappling with the potential for economic slowdown or recession, and so the commodity names are pretty significantly off their highs," Marks said in an interview.
Prices are coming down from the big spike caused by Russia's invasion of Ukraine, but are still generally elevated, he said.
"Although commodity prices have come off the highs, they're still in most cases above their pre pandemic levels, so I think really It's important to have perspective on the moves in commodity prices on a longer term basis, rather than looking at what we've seen over the last few months."
The Canadian dollar traded for 77.66 cents US compared with 77.55 cents US on Thursday.
Materials was also lower even though metals were up.
The August gold contract was up US$14.00 at US$1,727.40 an ounce and the September copper contract was up 5.1 cents at US$3.35 a pound.
Marks said the improved market activity this week stems from weaker economic data that is giving people comfort that moves by central banks to raise interest rates is starting to slow the economy.
"And so when people start to feel like the central bankers' work is done or having an impact, they'll feel like we could be getting close to the end of this very aggressive interest rate tightening cycle."
In addition, she said markets bounced back from a significant selloff because second-quarter earnings results weren't nearly as bad as was expected as many companies have been able to pass on higher prices to maintain earnings.
"So I think those two things in combination have created a nice level of support for equity markets."
Next week's results will likely be dominated by an interest rate increase by the U.S. Federal Reserve and GDP numbers in the U.S. The Fed is expected to increase its rate by three quarters of a percentage point.
"If it's in line with expectations, I think the market will take that in stride."
If the GDP numbers are negative, it will represent a technical recession. But Marks expects people will look beyond the headline number to what is driving that movement and the context of a still strong economy, good employment and wage gains.
"So I think what people will be really looking at in the GDP numbers is less the headline but more the consumer and business side of GDP."
This report by The Canadian Press was first published July 22, 2022.
Companies in this story: (TSX:VET, TSX:ERF, TSX:SHOP, TSX:GSPTSE, TSX:CADUSD=X)
Ross Marowits, The Canadian Press
